It is alleged in the lawsuit that in 2002-2003, AT&T permitted and assisted the NSA to install a NarusInsight system in its San Francisco switching center (Room 641A), which was capable of monitoring billions of bits of Internet traffic a second, including the playback of telephone calls routed on the Internet, and thus in effect spying upon the entirety of the communication of many or all American citizens and businesses who use the Internet.

Despite what we are hearing, and considering the public track record of this administration, I simply do not believe their claims that the NSA's spying program is really limited to foreign communications or is otherwise consistent with the NSA's charter or with FISA ... And unlike the controversy over targeted wiretaps of individuals' phone calls, this potential spying appears to be applied wholesale to all sorts of Internet communications of countless citizens.

The EFF alleges in the suit that AT&T also allowed the NSA to data-mine hundreds of terabytes of client records which included detailed transaction records such as domestic numbers dialed since 2001, and all Internet addresses visited, as well as other content. The EFF's attorney Kevin Bankston states:

Our goal is to go after the people who are making the government's illegal surveillance possible ... They could not do what they are doing without the help of companies like AT&T. We want to make it clear to AT&T that it is not in their legal or economic interests to violate the law whenever the president asks them to.

AT&T objected to the filing of the documents supporting the case on the grounds they were trade secrets or might compromise the security of its network. The EFF speculated that the federal government would invoke the state secrets privilege to bar the entire lawsuit from being heard, but added: "If state secrecy can prevent us from preserving the rights of millions upon millions of people, then there is a profound problem with the law."

EFF's speculation proved accurate when the government indicated, in an April 28 statement of interest in the case, that it intended to invoke the state secrets privilege in a bid to dismiss the action.[7] The Justice Department filed its motion to dismiss on May 15, 2006. On July 20, however, Chief Judge Vaughn Walker of the United States District Court for the Northern District of California rejected the federal motion, holding that "[t]he government has opened the door for judicial inquiry by publicly confirming and denying material information about its monitoring of communications content."[8]

In his decision not to dismiss the case Judge Walker certified the case for immediate appeal, and the government and AT&T both appealed to the Ninth Circuit. The case was argued in August 2007.[9]

In July 2008, Congress passed,[10] and on July 10, 2008, President George Bush signed, the FISA Amendments Act, which granted retroactive immunity to telecommunications companies for past violations of FISA.[11] Before any Ninth Circuit decision, the case was returned to the District Court "[i]n light of the FISA Amendments Act of 2008."[12] In September 2008, Attorney GeneralMichael Mukasey filed a certification[13] pursuant to Section 802 of the FISAAA and the government moved to dismiss the Hepting litigation.

The Hepting plaintiffs opposed the motion to dismiss,[14] asserting that the FISA Amendments Act's retroactive immunity provision was unconstitutional. Judge Walker heard oral arguments on December 2, 2008, and took the matter under submission.[15]

The case was dismissed on June 3, 2009 by Judge Walker,[1] citing retroactive legislation (section 802 of FISA) stating that[2]

in the case of a covered civil action, the assistance alleged to have been provided by the electronic communication service provider was in connection with an intelligence activity involving communications that was authorized by the President during the period beginning on September 11, 2001, and ending on January 17, 2007; designed to detect or prevent a terrorist attack, or activities in preparation for a terrorist attack, against the United States; and the subject of a written request or directive, or a series of written requests or directives, from the Attorney General or the head of an element of the intelligence community (or the deputy of such person) to the electronic communication service provider indicating that the activity was authorized by the President; and determined to be lawful.

On February 5, 2006, USA Today ran a further story that, according to seven telecommunications executives, NSA had secured the cooperation of the main telecommunications companies in charge of international phone-calls, including AT&T, MCI and Sprint, in its efforts to eavesdrop without warrants on international calls.[18]